USA: Dominion Files for Cove Point LNG Export Permit

Dominion has filed with the Department of Energy for permission to use its Dominion Cove Point facility on the Chesapeake Bay in Lusby, Md., to export liquefied natural gas (LNG) to any country with which the U.S. does not prohibit trade.  

In its application, Dominion said exports would be in the public’s interest because studies show they could provide an enormous economic stimulus, provide energy price stability, promote the continued development of domestic natural gas and natural gas liquids, create thousands of new jobs in the oil and gas industry, increase tax revenues and improve the balance of trade.

Thomas F. Farrell II, chairman, president and chief executive officer of Dominion, said: “Dominion Cove Point has connections to several interstate pipelines and is well-positioned to provide export customers access to abundant and diverse domestic gas supply. The facility is particularly well-situated to export gas production from the prolific Marcellus Shale and promising Utica Shale formations. It is in our nation’s best interests to develop our natural resources responsibly and reliably. In the process, we will be able to improve the nation’s balance of trade.”

Specifically, economic studies filed with the application show benefits from exports and upstream gas production over the 25-year proposed term could include:

  • A reduction of the U.S. trade imbalance by at least $2.8 billion annually, and possibly as much as $7.1 billion;
  • A total of $22 billion in added government royalty and other revenues to federal, state, and local governments over the 23-year post-construction operating period (2018-2040), an average of $962 million annually. In addition, there would be $9.8 billion in landowner royalty income over the 25-year operating period;
  • Up to a $40 million annual increase in local property tax revenues in Calvert County Maryland; and
  • About 14,600 permanent jobs during the 23-year post-construction operating period (2018-2040), which are associated with facility operations and upstream natural gas production.

 

The studies filed with the application include an economic study of construction and operations completed by ICF International of Fairfax, Va., and market and supply studies completed by Navigant Consulting, Inc. of Rancho Cordova, Calif.

This filing is the second phase of a two-phase export authorization request.  The first phase, requesting authorization to export LNG to countries that have a Free Trade Agreement (FTA) with the U.S., was filed Sept. 1.  The current list of FTA countries is very limited and none of the countries import significant volumes of LNG.

This application asks for permission to export up to 1 billion cubic feet per day, or 7.82 million metric tons per year, over a 25-year term to any country with which the U.S. does not prohibit trade.  In order to export natural gas, Dominion would have to add liquefaction facilities to the existing Dominion Cove Point LNG import terminal.  Construction of the new facilities could potentially begin in 2014 with an in-service date at the end of 2016.

Dominion is proposing to operate Dominion Cove Point as a bi-directional facility. It would continue to be able to import LNG and vaporize it as natural gas. In the future, it would be able to liquefy natural gas and export it as LNG. With both import and export capability, the terminal would be positioned to provide services to its customers in any market environment.

Dominion plans to provide this new service to liquefy the natural gas for its customers. Dominion would not actually own or directly export the LNG.  Customers would be responsible for supplying the natural gas to the terminal and then shipping and selling the LNG to foreign entities.

Dominion will design and operate this proposed facility to minimize environment impacts.  In preparation for this filing, Dominion has discussed the benefits of this project with many federal, state and local officials.  In addition to Department of Energy approval, Dominion would need environmental and regulatory approvals from the Federal Energy Regulatory Commission as well as other federal, state and local governmental authorities.

While this project offers substantial potential benefits, Dominion has not made the final decision on pursuing the project and does not plan to do so until the necessary regulatory approvals, customer commitments and approval by Dominion’s Board of Directors are received.

Source: Dominion, October 4, 2011

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